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Wedi Corp. v. Seattle Glass Block Window, Inc.

United States District Court, N.D. Illinois, Eastern Division

April 16, 2018

WEDI CORP. Plaintiff,
v.
SEATTLE GLASS BLOCK WINDOW, INC. Defendant.

          MEMORANDUM OPINION AND ORDER

          HON. JORGE ALONSO UNITED STATES DISTRICT JUDGE.

         Plaintiff wedi Corporation (“wedi”), an Illinois corporation, is suing Seattle Glass Block Window, Inc. (“SGB”), a Washington corporation, for breach of contract (Count I); breach of fiduciary duty (Count II); fraud (Count III); violation of the Illinois Trade Secrets Act, 765 ILCS 1065 (Count IV); and in the alternative, for violation of the Uniform Trade Secrets Act, RCW 19.108 (Count V). Defendant moves to dismiss for lack of personal jurisdiction and improper venue, or in the alternative, for transfer of venue to the United States District Court for the Western District of Washington. For the following reasons, the motion is denied as to personal jurisdiction and granted as to transfer to the Western District of Washington.

         BACKGROUND

         Wedi manufactures and distributes waterproof building panels and related products used in the construction and remodeling of showers and other tiled wet rooms. (Compl. ¶ 1.) On May 1, 2008, wedi and SGB entered into an Agency Agreement to appoint SGB as wedi's exclusive agent to solicit orders for wedi products in the states of Alaska, Hawaii, Idaho, Montana, Oregon, Texas, Washington, and Wyoming. (Compl. ¶¶ 6, 8; Compl. Exs. A & B.) At the time the parties entered into the Agency Agreement, wedi was a Georgia corporation and Georgia was its principal place of business. (Compl. ¶ 1.) SGB is owned and controlled by Brian Wright, a resident of Washington and former employee of wedi. Following Wright's resignation from wedi on September 2, 2014, wedi terminated the Agency Agreement with SGB on September 30, 2014, thereby ending their business relationship. (Compl. ¶ 54.) Wedi alleges that, between 2008 and 2014, during his employment with wedi, Wright harmed wedi by taking actions on behalf of SGB that ran counter to wedi's interests.

         According to the Complaint, SGB assisted and disclosed confidential information to a competitor of wedi, Hydroblok International Ltd., (“Hydroblok”), a Canadian corporation, and its subsidiary in the United States, HydroBlok USA, Inc. (“HydroBlok USA”), which is a Washington corporation operated by Wright. Hydroblok is owned and controlled by Ken Koch. Koch distributed products in British Columbia, Yukon, the Northwest Territories of Canada, and the United States Pacific Northwest. (Compl. ¶¶ 18, 19.) Wedi alleges that SGB forwarded confidential information via email to Hydroblok and a Chinese company, Home Elements, Inc. (Compl. ¶¶ 25-52.)

         In June 2009, wedi moved its headquarters from Georgia to Illinois. (Compl. ¶ 59.) SGB communicated by phone and email with wedi in Illinois in order to perform its responsibilities under the Agency Agreement. (Id.) SGB allegedly emailed and spoke to wedi representatives hundreds of times soliciting instructions, directions, support, and information from wedi in Illinois. (Id.) In particular, SGB allegedly wrote to wedi in Illinois in May 2013 requesting information (“confidential product mix”) on sales in wedi's western territory, which SGB then provided to wedi's competitors. (Compl. ¶ 75.) SGB also remitted payments to wedi, which wedi processed in Illinois. (Compl. ¶ 60.) Wedi alleges that while Wright was negotiating his new contract in 2013 with wedi, Wright made representations that he might sell SGB and divest from it. (Compl. ¶ 61.) Wedi alleges that Wright knew he would not sell SGB and divest. (Compl. ¶¶ 61-62.)

         Plaintiff alleges that Wright attended a sales meeting in 2012 in Chicago where confidential sales information and distribution charts were displayed and distributed. (Compl. ¶ 68.) According to plaintiff, Wright communicated this information to its competitors. (Compl. ¶ 69.) SGB does not dispute that Wright attended, but it disputes that Wright was in attendance on behalf of SGB. (Def.'s Mot. to Dismiss at 10-11.)

         In April 2015, wedi sued Wright, Sound Product Sales, LLC (hereafter “SPS”), and HydroBlok USA (collectively hereafter “Washington defendants”) in the Western District of Washington, in a case entitled wedi Corp. v. Brian Wright, et al., 2:15-cv-00671-TSZ, (hereafter “Case 671”) for breach of contract (Count I); breach of fiduciary duty (Count II); unjust enrichment (Count III); violation of the Lanham Act, 15 U.S.C. § 1125 (Count IV); civil conspiracy (Count V); violation of the Washington Consumer Protection Act, RCW 19.86.020 (Count VI); and tortious interference with prospective economic advantage (Count VII). (Dekenberger Decl. Ex. 1, ECF No. 21-1 at 11-15.) The Washington defendants moved to compel arbitration in Case 671 in July 2015 based on an arbitration provision in the 2013 Agreement between wedi and Wright. (Pl.'s Opp'n to Def.'s Mot. To Dismiss at 4.) The Western District of Washington granted the motion and arbitration took place in Chicago before the American Arbitration Association (“AAA”) (hereafter “Chicago Arbitration”). The Chicago Arbitration took place in March 2017 and the arbitrator delivered the award in June 2017. (Pl.'s Opp'n to Def.'s Mot. To Dismiss at 4.)

         In June 2015, wedi filed counterclaims in another case Hydro-Blok USA LLC, et al. v. wedi GmbH, et al., 2:15-cv-00615 (hereafter “Case 615”). (Pl.'s Opp'n to Def.'s Mot. To Dismiss at 4.) As in this case, the claims arose out of Wright's alleged disclosure of confidential information to competitors. Case 671 and Case 615 were consolidated in 2015 in the Western District of Washington, and the consolidated case is presently ongoing. (Pl.'s Opp'n to Def.'s Mot. To Dismiss at 4-5.) SGB was not a party to either Washington case or the Chicago Arbitration.

         ANALYSIS

         I. PERSONAL JURISDICTION

         Personal jurisdiction based on diversity in federal court may be general or specific. General jurisdiction exists where the defendant's contacts with the forum state are “so continuous and systematic as to render [it] essentially at home in the forum.” Daimler AG v. Bauman, 134 S.Ct. 746, 754 (2014) (internal quotation marks omitted).

         SGB is headquartered in Washington, registered as a corporation in Washington, and does business solely in the Pacific Northwest. SGB does not contact the state of Illinois continuously or systematically, nor is its principal place of business in Illinois. SGB is not at home in the state of Illinois, and therefore general jurisdiction does not exist in this case.

         Where, as here, no federal statute authorizes nationwide service of process, specific personal jurisdiction exists if the exercise of jurisdiction is authorized by the forum state's long-arm statute and comports with the requirements of the Fourteenth Amendment's Due Process Clause. Tamburo v. Dworkin, 601 F.3d 693, 700 (7th Cir. 2010) (citing Fed.R.Civ.P. 4(k)(1)(A)). Illinois's long-arm statute specifically authorizes personal jurisdiction over defendants that are “transact[ing] any business within” Illinois or “perform[ing] any contract or promise substantially connected with” Illinois, 735 ILCS 5/2-209(a)(1) and (6), but the Court need not interpret that language because Illinois's long-arm statute also permits courts to exercise jurisdiction to the full extent permitted by the Due Process Clause of the Fourteenth Amendment, 735 ILCS 5/2-209(c). Therefore, in this case, “the state statutory and federal constitutional inquiries merge.” Tamburo, 601 F.3d at 700.

         The Due Process Clause of the Fourteenth Amendment limits the power of a court to render a judgment over nonresident defendants. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980). To overcome this limitation, the defendant must have had sufficient “minimum contacts . . . such that the suit does not offend traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457 (1940)) (internal quotations omitted). While the defendant's physical presence in the forum State is not required, there must be sufficient minimum contacts such that he or she “should reasonably anticipate being haled into court there.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) (quoting World-Wide Volkswagen Corp., 444 U.S. at 297). Additionally, the defendant's “relationship must arise out of contacts that the defendant himself creates with the forum State.” Walden v. Fiore, 134 S.Ct. 1115, 1122 (2014) (internal quotation marks omitted, emphasis in original); see also John Crane Inc. v. Shein Law Center, Ltd., No. 16-CV-05913, 2017 WL 1105490 (N.D. Ill. Mar. 23, 2017) (defendant's alleged fraudulent activity taking place in Pennsylvania did not permit suit in Illinois merely because defendant knew plaintiff was an Illinois corporation). “[T]he plaintiff cannot be the only link between the defendant and the forum.” Walden, 134 S.Ct. at 1121.

         A defendant has sufficient contacts with the forum state to support the exercise of specific jurisdiction if the following conditions are met: “(1) the defendant must have purposefully availed himself of the privilege of conducting business in the forum state or purposefully directed his activities at the state; (2) the alleged injury must have arisen from the defendant's forum-related activities; and (3) the exercise of jurisdiction must comport with ...


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